Correlation Between Valvoline and BorgWarner
Can any of the company-specific risk be diversified away by investing in both Valvoline and BorgWarner at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Valvoline and BorgWarner into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Valvoline and BorgWarner, you can compare the effects of market volatilities on Valvoline and BorgWarner and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Valvoline with a short position of BorgWarner. Check out your portfolio center. Please also check ongoing floating volatility patterns of Valvoline and BorgWarner.
Diversification Opportunities for Valvoline and BorgWarner
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Valvoline and BorgWarner is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Valvoline and BorgWarner in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BorgWarner and Valvoline is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Valvoline are associated (or correlated) with BorgWarner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BorgWarner has no effect on the direction of Valvoline i.e., Valvoline and BorgWarner go up and down completely randomly.
Pair Corralation between Valvoline and BorgWarner
Considering the 90-day investment horizon Valvoline is expected to generate 0.9 times more return on investment than BorgWarner. However, Valvoline is 1.11 times less risky than BorgWarner. It trades about 0.04 of its potential returns per unit of risk. BorgWarner is currently generating about 0.02 per unit of risk. If you would invest 3,505 in Valvoline on September 3, 2024 and sell it today you would earn a total of 439.00 from holding Valvoline or generate 12.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Valvoline vs. BorgWarner
Performance |
| Timeline |
| Valvoline |
| BorgWarner |
Valvoline and BorgWarner Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Valvoline and BorgWarner
The main advantage of trading using opposite Valvoline and BorgWarner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valvoline position performs unexpectedly, BorgWarner can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in BorgWarner will offset losses from the drop in BorgWarner's long position.| Valvoline vs. Cosan SA ADR | Valvoline vs. Delek Energy | Valvoline vs. Crossamerica Partners LP | Valvoline vs. Par Pacific Holdings |
| BorgWarner vs. Allison Transmission Holdings | BorgWarner vs. Aptiv PLC | BorgWarner vs. LKQ Corporation | BorgWarner vs. Lear Corporation |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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